Like all of its counterparts worldwide, the Reserve Bank of Australia would always characterize itself as ‘data-dependent’. It doesn’t have a fixed view on monetary policy and the appropriate level of interest rates. Instead, it watches the incoming economic numbers, offers interesting and thought-provoking analyses of them and adjusts its signaling to market participants as the data themselves evolve.
When reading through the economic numbers of the last week, it will note Thursday’s better than expected Australian international trade figures were followed by a very poor set of retail sales data. We suggested here that better trade numbers told us more about the external environment than they did about the state of domestic demand. And, though they will definitely give a boost to GDP, this wouldn’t necessarily translate into higher employment, wages or spending power in Australia.
This was exactly how it played out. Thursday’s data saw AUD/USD squeeze up to a best level of 0.7724 but it couldn’t even hold onto a US 77 cents handle for as long as 24 hours and ended the week back down at 0.7650. There’s not a lot other than RBA signals to watch this week for the AUD. After Tuesday’s Board meeting, the focus will then shift to the Statement of Monetary Policy (SoMP) on Friday.